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A company manufactures a single product which passes through two processes the output of process 1 becoming the input to process 2

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A company manufactures a single product which passes through two processes the output of process 1 becoming the input to process 2.Normal losses and abnormal losses are defective units having a scrap value and cash is received at the end on the period for all such units. The following information relates to the four week period. Raw material issued to process I was 3,000 units at the cost of Rs. 5/- per unit. There was no opening and closing work-in-progress but opening and closing stock of finished goods were Rs. 20,000/- and Rs. 23,000/- respectively. Process 1 Process 2 Normal loss as a percentage of input 10% 5% Output in units 2,800 2,600 Scrap value per unit Rs. 2 Rs. 5 Additional Components 1,000 780 Direct wages incurred 4,000 6,000 Direct expenses incurred 10,000 14,000 Production O/H as a percentage of wages 75% 125% You are required to present the account for a) Process 1 and 2 b) Finished Goods c) Normal Loss d) Abnormal Loss e) Abnormal Gain f) Profit & Loss Account

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Process 1 Account

Particulars	Units	Rs.	Particulars	Units	Rs.
To Material Introduced @ Rs. 5 per unit	3,000	15,000	By Normal Loss	300	600
To Additional Components		1,000
To Direct Wages incurred		4,000
To Direct expenses incurred		10,000	By Process 2 A/c	2,800	33,600
To Production of O/H		3,000
To Abnormal Gain	100	1,200
	3,100	34,200		3,100	34,200

Process 2 account

Particulars	Units	Rs.	Particulars	Units	Rs.
To Process 1 A/c	2,800	33,600	By Normal Loss	140	700
To Additional Components		780	By Abnormal Loss	60	1,380
To Direct Wages incurred		6,000
To Direct expenses incurred		14,000	By Finished Goods	2,600	59,800
To Production O/H		7,500
	2,800	61,880		2,800	61,880

Finished Goods Account

Particular	Rs.	Particular	Rs.
To Opening Stock	20,000	By Sales	56,800
To Process 2 (Transferred from Process 2 Account)	59,800	By Closing Stock	23,000
	79,800		79,800

Normal Loss Account

Particulars	Units	Rs.	Particular	Units	Rs.
To Process 1	300	600	By Sale of Waste Units	340	1100
To Process 2	140	700	By Abnormal Gain A/c	100	200
	440	1,300		440	1,300

Abnormal Loss Account

Particulars	Units	Rs.	Particulars	Units	Rs.
To Process 2	60	1,380	By Sale of Waste units:	60	300
			By Profit and Loss A/c		1,080
	60	1,380		60	1,380

Abnormal Gain Account

Particulars	Units	Rs.	Particular	Units	Rs.
By Normal Loss A/c	100	200	By Process 1 Account	100	1,200
By Profit & Loass A/c		1,000
	100	1,200		100	1,200

Profit & Loss Account

(So far as it relates to any of the accounts listed Above)

Particulars	Rs.	Particulars	Rs.
To Abnormal Loss	1,080	By Abnormal Gain	1,000
		By Net Loss	80

Working Notes:

1 (i) Per Unit cost of normal production under process 1:

= Normal Cost of Normal output\normal output

=33,000-600\3,000-300

= Rs. 12

(ii) Value of abnormal Gain under process 1

Abnormal Gain units= Normal Loss - Actual Loss

= 300 - 200=100 units

Per units cost of normal production $\times$ Abnormal gain units

= Rs. 12 $\times$ 100 units=Rs. 1,200

2(i) Per unit cost of normal proudction under process 2:

= Normal cost of Normal output/normal ouput

=61,880-700/2,800-140

= Rs. 23

(ii) Value of abnormal loss under process 2:

Abnormal Loss units = Normal output - Actual output

= 2660 - 2600 = 60 units

Amounts of Abnormal Loss = Per units cost of normal units $\times$ Abnormal Loss in units

= 60 $\times$ 23 = Rs. 1,380

3. Actual Loss in process 1 (300-100) = 200 units

Processs credited to process 1 = 300 units

Excess proceeds credited = 100 units

Each units realised Rs. 2

Total amount to be debited to abnormal gain account = Rs. 200

A company manufactures a single product which passes through two processes the output of process 1 becoming the input to process 2

Accounting